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We report on a design-led study in the UK that aimed to understand barriers to children (aged 5 to 14 years) 'playing out' in their neighbourhood and explore the potential of the Internet of Things (IoT) for supporting children's free play that extends outdoors. The study forms a design ethnography, combining observational fieldwork with design prototyping and co-creative activities across four linked workshops, where we used BBC micro:bit devices to co-create new IoT designs with the participating children. Our collective account contributes new insights about the physical and interactive features of micro:bits that shaped play, gameplay, and social interaction in the workshops, illuminating an emerging design space for supporting 'digital playing out' that is grounded in empirical instances. We highlight opportunities for designing for digital playing out in ways that promote social negotiation, supports varying …